Ontario’s next cannabis frontier: Focus shifts to new rules and new cities

The beginning of 2024 has been a period of change for Ontario’s cannabis industry, still in its early years.

New Year’s Day saw regulations introduced that doubled the number of stores an operator could run, with the cap shooting up from 75 to 150. The change shocked many smaller cannabis businesses, who said it would help a select few big companies expand.

Then, Global News revealed grocery giant Loblaws may be circling the cannabis industry.

Lobbyists for the supermarket have been asking the Ford government for retail rule changes since at least 2019, including requesting a model that could let them open cannabis operations inside existing grocery stores.

The choppy waters have left some retailers eagerly eyeing new markets to expand into and hoping to see other changes to how the industry runs that will make it easier for so-called mom-and-pop stores to thrive.

For years after legalization, Ontario’s cannabis industry looked settled: many cities had opted to allow weed stores and a few had decided to sit out.

That is until 2023 when Mississauga became the first major holdout city to indicate it could be willing to drop its opposition to licensed cannabis stores and allow them to sell legal weed.

In mid-April, the city made good on its indication, with council allowing applications for legal stores, with new businesses flooding into the city.

One of the key reasons lawmakers cited for their change of heart was an inability to fight the illegal market without a licensed alternative.

“We are not addressing the black market whatsoever,” former Mississauga mayor Bonnie Crombie said in April 2023. “In fact, I have to believe we are promoting the black market by not allowing legal shops to open.”

1:33 Mississauga councillors vote to lift ban on cannabis stores

Matt Piotrowicz, the founder of Purple Tree Cannabis, was one of the cannabis retailers who jumped into the newly-opened market “pretty quickly.”

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He told Global News that, unlike when cannabis launched in Toronto, the market in Mississauga felt less saturated and ready for healthy competition. Allowing licensed stores, he said, had helped the city tackle illegal stores, though they are far from eradicated.

“There’s still a couple of illegal stores just up the street from us that we’re competing against right now,” Piotrowicz said. “But I feel good that in the future, those stores won’t exist as people have more access to legal cannabis.”

He said he and many other cannabis retailers are eagerly waiting to see if other cities will join Mississauga in changing their minds.

2:26 Markham, Mississauga opt out of cannabis stores

Several cities across the Greater Toronto Area continue to resist requests from retailers to expand. Oakville, Markham, Vaughan and Richmond Hill, for example, are all still officially against licensed cannabis stores.

Piotrowicz said that if Oakville changes its stance, that is the place he hopes to take his budding business next.

“Oakville is pretty much the one we’re looking at next, it’s almost 100 per cent in the books as long as we can find a good location,” he said.

Global News approached Oakville, Markham, Vaughan and Richmond Hill to ask if they were considering changing their approach.

Vaughan and Markham both reiterated that their previous opposition still stands.

While cannabis businesses look to new markets, some operators say the current system is far from perfect.

One industry group representing small businesses said there were “other issues plaguing the industry” for recent decisions to increase the cannabis cap to be a priority.

Adam Vassos, president of the Retail Cannabis Council of Ontario, told Global News mandatory window coverings at weed stores to keep their products away from passing eyes were one such issue.

He pointed out cannabis products are already wrapped in plain packing, suggesting window coverings are a “safety concern” for some store owners and can make it easier for robberies to take place.

The request to remove window coverings is one Loblaws also made to the Ford government in a spree of 2022 lobbying activity.

In requests submitted to the province, Loblaws said removing window coverings would “protect workers,” citing a “record number” of robberies.

2:16 Ontario cannabis stores seek to change restrictions around windows

Piotrowicz said that, as the illegal market persists, price and tax relief could be necessary to keep customers coming back to licensed vendors.

“I think the producers need to get a tax break,” he said.

“I think that’s been a big issue for them to supply the retail stores with more competitive pricing. if they can offer it to us for cheaper, we can sell it for cheaper.”

In particular, small cannabis retailers take issue with cannabis excise tax.

Owen Allerton, the CEO of Highland Cannabis, explained the duty is a significant element of the price paid at licensed stores.

“For example, someone buying $100 ounces of dried flower from a legal store, $50 of that is because of the federal excise tax,” he told Global News. “It’s a little crazy because it’s a fixed amount per gram, not a per centage (of price).”

Without having to pay that tax, Allerton and Piotrowicz argue that illicit stores benefit hugely from skirting tax by operating in the black market.

“You can get an ounce for $50 at an illicit store where they don’t have to pay that excise tax,” Allerton said.

2:20 New Ontario cannabis rules could have ‘Amazon effect’ on industry